2005 Reinsurance Call Papers Highlighted
By Robin Gillam, Chairperson, Committee on Reinsurance Research

The Committee on Reinsurance Research had a good response to a call for reinsurance papers issued last summer. The theme of the 2005 call, "Pricing Low-Frequency, High-Risk Exposures," generated many submissions. At press time, ten papers have been accepted for publication in the CAS Spring Forum. The presentations have been scheduled for the Reinsurance Seminar, which will be held June 6-7 in Hamilton, Bermuda. Accepted papers are eligible for the 2005 Ronald Ferguson Reinsurance Prize, which will be awarded at the seminar.

The papers cover a wide range of topics. Following is a brief synopsis of the papers accepted thus far.

"Pricing Industry Loss Warrantees"
Reinsurers may guard against extreme losses in the event of catastrophes through the purchase of industry loss warrantees. The paper discusses pricing these using size of loss distributions. "Stochastic Excess of Loss Pricing Within a Financial Framework" The theory of extreme values can be used within a financial framework to price excess of loss reinsurance treaties.

"Exposure Rating Casualty Reinsurance Excess Layers with Closed-Form Annuity Models"
The program Mathematica will be used to generate closed-form solutions to the parameter variance, as well as the process variance in mortality, inflationary trends, and the like.

"Simple Practical Estimation of Sub-Portfolio Catastrophe Loss Exceedance Curves with Limited Information"
The paper discusses how to use relative frequency and severity data to specialize information known for the total portfolio only.

"On the Optimality of Proportional Reinsurance"
This paper analyzes possible selections of proportional reinsurance programs that can optimize performance for the ceding company.

"An Improved Method for Experience Rating Excess of Loss Contracts Using Exposure Rating Techniques"
Standard experience rating can be significantly improved by utilizing the mathematics of exposure rating to take full advantage of available data. The paper explores the use of such techniques in trending and exposure adjustment.

"Predictive Loss Modeling for High Layer Casualty Claims"
For pricing excess of loss reinsurance treaties, data usually includes only a handful of claims. How do you decide between the use of industry aggregate data and fitting a distribution to the submitted data?

"The Cost of Capital in the Financing of Catastrophe Risk"
To measure the cost of capital for catastrophe reinsurance covers, the paper cites a number of studies, such as Kielholz (2000) and Cummins and Phillips (2004).

"Transition-Matrix Theory and Individual Claim Development"
This paper applies transition-matrix theory to a large collection of general liability reinsurance claims to model claim development, and compares results to the empirical ones.

"Coherent Capital for Treaty ROE Calculations"
You want your capital to be coherent, right? It's a good thing. For more information on which papers will be presented and the 2005 Reinsurance Seminar. The Spring Forum will available online and in print in late April-early May.